Luxembourg’s Foreign Minister accuses Germany of “euro zone hegemony”

Luxembourg’s foreign minister accused Germany on Tuesday of “striving for hegemony” in the euro zone by telling Cyprus what business model it should pursue.

Like Cyprus, Luxembourg has a large financial sector, whose comparatively light-touch tax and regulatory regime has long irked its much bigger neighbors Germany and France.

“Germany does not have the right to decide on the business model for other countries in the EU,” Foreign Minister Jean Asselborn told Reuters. “It must not be the case that under the cover of financially technical issues other countries are choked.”

“It cannot be that Germany, France and Britain say ‘we need financial centers in these three big countries and others must stop’.”

That was against the internal market and European solidarity, and “striving for hegemony, which is wrong and un-European,” he said.

Germany, the European Union’s biggest and most powerful economy, had insisted that wealthy depositors in Cyprus’ banks contribute to the island’s bailout and said the crisis has killed a “business model” based on low taxes and attracting large foreign deposits.

Asselborn said it was crucial that smaller EU states in particular were allowed to develop certain economic niches.

Germany should also keep in mind it was a prime beneficiary of the euro zone crisis because its borrowing costs have plunged as nervous investors seek safe havens, Asselborn added. (Full article REUTERS)

PS what if all small and problematic countries abandon the euro zone and let Germany sitting alone on its euro? Given the import taxes that will be imposed on German products I hardly see any chance Berlin will ever be able to sell even a single coffee-machine or a hair-dryer to Greece or Portugal.